EXHIBIT 10.7
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (this "AMENDMENT") is
entered into as of July 30, 2004, by and among Hospice USA, LLC, a Tennessee
limited liability company ("HOSPICE USA"), the Affiliated Sellers (collectively
with Hospice USA, "SELLERS"), and Hospice Preferred Choice, Inc., a Delaware
corporation ("BUYER").
INTRODUCTION. Sellers and Buyer are parties to the Asset Purchase
Agreement dated as of May 27, 2004 (the "PURCHASE AGREEMENT"), pursuant to which
the Parties have agreed that Sellers will sell to Buyer, and Buyer will purchase
from Sellers, the Purchased Assets, and Buyer will assume the Assumed
Liabilities. Sellers and Buyer desire to amend certain provisions of the
Purchase Agreement. For and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt, adequacy and legal sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. DEFINED TERMS; SECTIONS. All capitalized terms that are used
but not defined herein shall have the same meanings given to them in the
Purchase Agreement. All section references used in this Amendment are to the
sections of the Purchase Agreement.
2. AMENDMENT OF DEFINITION OF "PERMITTED LIENS" IN SECTION
1.1(a). The definition of "Permitted Liens" in Section 1.1 (a) is deleted in its
entirety and is replaced with the following:
"PERMITTED LIENS" means (i) Liens in favor of BCL
Capital and U.S. Bancorp on certain Equipment leased by Hospice South
of Tennessee, L.L.C., which are described in Schedule 3.1(h); (ii)
Liens for current Taxes that are not yet due and payable or not yet
delinquent or the amount or validity of which is being contested in
good faith by appropriate proceedings; (iii) liens of carriers and
warehousemen incurred in the Ordinary Course of Business for sums not
yet due; (iv) liens incurred or deposits made in the Ordinary Course of
Business in connection with workers' compensation, unemployment
insurance and other types of social security; (v) zoning, entitlement,
and other land use and environmental restrictions imposed by
Governmental Entities; and (vi) easements and restrictive covenants.
3. DELETION OF DEFINITION OF "SELLER DEBT" IN SECTION 1.1(a). The
definition of "Seller Debt" in Section 1.1 (a) is deleted in its entirety.
4. AMENDMENT OF SECTION 2.3. Section 2.3 is amended by deleting
clause (a) and re-lettering the remaining clauses as (a) through (d).
5. AMENDMENT OF SECTION 2.4. Section 2.4 is amended by:
(a) deleting the word "and" at the end of clause (m);
(b) adding the word "and" at the end of clause (n);
(c) deleting the remaining text of Section 2.4; and
(d) adding the following text after clause (n):
(o) all principal, premium (if any), interest,
and other indebtedness of Sellers and all other Liabilities of Sellers,
whether incurred before, on or after the date hereof, under (i) the
Nonnegotiable Subordinated Promissory Noted dated December 1, 2003,
payable by New Horizons to Friendship Hospice of Nashville, Inc., a
Tennessee corporation, in the original principal amount of Seven
Hundred Eighty Thousand Dollars ($780,000); (ii) the promissory notes
and other loan documents evidencing the indebtedness, if any, incurred
in connection with the purchase of certain Vehicles; (iii) any and all
credit agreements, loan agreements, security agreements, and other
documents relating to any of the foregoing; and (iv) any and all
amendments, modifications, extensions, renewals and refundings of any
of the foregoing;
provided, however, that the amount of the Excluded Liability related to
overpayments by Medicare to all applicable Sellers arising solely from
payments made to such Sellers or Buyer which exceed the benefit
limitation for hospice services provided to patients who are eligible
for and have properly elected hospice benefits for the twelve-month
period from September 28, 2003, to September 27, 2004, for which
Sellers shall remain responsible, shall be an amount equal to the
lesser of-
(i) seventy-five percent (75%) of such
total overpayment Liability of all applicable Sellers to Medicare for
such twelve month period, which amount (A) shall be initially
calculated by Buyer, (B) shall be provided to Sellers no later than
November 30, 2004, in order to allow them a reasonable opportunity to
review and comment to Buyer upon the same, (C) shall be agreed upon by
the Parties as soon as practicable after the initial calculation is
received by Sellers, and (D) in any event shall be finally and
conclusively determined by the applicable fiscal intermediary, or
(ii) the amount of such overpayment
Liability of all applicable Sellers to Medicare for the interim period
from September 28, 2003, to July 23, 2004, which amount (A) shall be
calculated by Sellers both in preliminary form using the allowable
capitated amount for the 2002-'03 cap year and in final form using the
allowable capitated amount for the 2003-'04 cap year, (B) shall be
provided to Buyer no later than July 26, 2004 (preliminary calculation)
and no later than ten (10) Business Days after the Center for Medicare
and Medicaid Services publishes the allowable capitated amount for the
2003-'04 cap year (final calculation) in order to allow Buyer a
reasonable opportunity to review and comment to Sellers upon the same,
and (C) shall be agreed upon by the Parties as soon as practicable
after the final calculation is received by Buyer;
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and provided, further, that the foregoing allocation of Liability for
such overpayments between the applicable Sellers and Buyer shall not
apply to overpayments for services to patients who were not eligible
for Medicare benefits relating to the hospice services provided by such
Sellers, which Liability shall be an Excluded Liability.
6. AMENDMENT OF SECTION 2.5(b)(1). Section 2.5(b)(1) is amended
by deleting clause (ii) and re-numbering the remaining clauses as (ii) and
(iii).
7. AMENDMENT OF SECTION 2.7(f). The phrase "three (3) Business
Days" in the last sentence of Section 2.7(f) is deleted and is replaced with the
phrase "four (4) Business Days".
8. AMENDMENT OF SECTION 3.1(t)(5). Section 3.1(t)(5) is amended
by deleting "(i)" in front of the third clause and replacing it with "(iii)".
9. ADDITION OF SECTION 4.9. The following text is added as
Section 4.9:
4.9 PAYMENT OF CERTAIN ACCOUNTS PAYABLE. During the
period from the date of this Agreement to the Closing Date, (a) Sellers
shall pay, on both Parties' behalf, such accounts payable relating to
the Business and pertaining to periods beginning before and ending
after the Closing Date as Buyer may reasonably request from time to
time, and (b) Sellers shall pay, on Buyer's behalf, such accounts
payable relating to the Business and pertaining to periods beginning
and ending after the Closing Date as Buyer may reasonably request from
time to time. At the Closing, Buyer shall reimburse Sellers
dollar-for-dollar for any and all such accounts payable that Sellers
have paid prior to the Closing Date. To the extent that any such
account payable represents a Liability relating to any period prior to
the Closing Date, the amount of such Liability shall continue to be
reflected as an account payable for the purpose of the calculation of
the Closing Date Working Capital pursuant to Section 2.7.
10. AMENDMENT OF DISCLOSURE SCHEDULES. The Disclosure Schedules
are deleted in their entirety and are replaced with the Disclosure Schedules
attached hereto.
11. EFFECT OF AMENDMENT. Except as specifically set forth herein,
the terms and provisions of the Purchase Agreement shall remain in full force
and effect.
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IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be
executed by its duly authorized manager or officer on the day and year first
above written.
SELLERS:
HOSPICE USA, LLC
HOSPICE SOUTH OF BIRMINGHAM, LLC
HOSPICE SOUTH OF DECATUR, LLC
HOSPICE SOUTH OF DEMOPOLIS, LLC
HOSPICE SOUTH OF HAMILTON, L.L.C.
HOSPICE SOUTH OF JACKSON, LLC
HOSPICE SOUTH OF MOBILE, LLC
HOSPICE SOUTH OF MONROEVILLE, LLC
HOSPICE SOUTH OF RUSSELLVILLE, LLC
HOSPICE SOUTH OF CENTRAL MISSISSIPPI, LLC
HOSPICE SOUTH OF CORINTH, L.L.C.
HOSPICE SOUTH OF HATTIESBURG, LLC
HOSPICE SOUTH OF MARSHALL COUNTY, L.L.C.
HOSPICE SOUTH OF MERIDIAN, LLC
HOSPICE SOUTH OF NEW ALBANY, L.L.C.
HOSPICE SOUTH OF PHILADELPHIA, LLC
HOSPICE SOUTH OF SENATOBIA, LLC
AMERICAN HOME MEDICAL EQUIPMENT,L.L.C.
HOSPICE SOUTH OF MEMPHIS, L.L.C.
HOSPICE SOUTH OF TENNESSEE, L.L.C.
NEW HORIZONS HOSPICE OF TENNESSEE, LLC
RICE ENTERPRISES, L.L.C.
By: /s/ Richard K. Rice
------------------------------------
Name: Richard K. Rice
Title: Chief Manager
BUYER:
HOSPICE PREFERRED CHOICE, INC.
By: /s/ Dwight C. Kouri
------------------------------------
Name: Dwight C. Kouri
Title: Vice President - Corporate Development
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